tv Nightly Business Report PBS August 3, 2011 6:30pm-7:00pm PDT
>> the u.s. had its skirts lifted, the world got a peek and they didn't like what they saw. >> tom: a see-saw day for wall street as investors are still reeling over the wrangling in washington. >> susie: tonight, we'll take a look at what's gnawing at investor sentiment. it's "nightly business report" for wednesday, august 3. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by: this program is made possible
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> tom: good evening everyone. susie gharib is off. i am joined by my colleague suzanne pratt. suzanne, a whipsaw day for wall street. it began with heavy selling on fresh worries about the economy and ended with a late day comeback for stocks. >> susie: tom, the services sector is the latest worry. today we learned a key measure of service activity fell to its lowest level since february 2010. and, investors shrugged off better-than-expected data on private sector jobs. a.d.p. reported that private
employers added 110,000 new jobs in july. >> tom: by the closing bell, the blue chips had turned an 150- point loss into a gain. the dow rose almost 30 points, the nasdaq was up 23 and the s&p 500 added six. volume was heavier, with 1.3 billion sharesinhe big board and 2.6 billion on the nasdaq. >> suzanne: investors big and small have had their confidence shaken by the down-to-the-wire debt deal in washington. market pros say investors are simply out of optimism. earlier today, i spoke with two n.y.s.e. veterans and what they had to say was troubling. >> the stock market is a forward-looking mechanism and, as such, perception is everything. and, i think people are just disgusted and fed up for whatever the reasons and they just want out. and, they'll just sit on the sidelines and wait for the dust
to settle. >> suzanne: long-time n.y.s.e. broker ted weisberg says politicians may be licking their wounds in washington over the deficit debacle, but here at the big board, traders can't sugarcoat the damage done in the last month to america's reputation. >> it's the process, the message, it's the lack of confidence, it's the negative circus environment that was created. not just for those of us who live in the u.s., but for the whole world to see. our skirts were lifted and the world did not like what it saw. >> suzanne: trader jonathan corpina says investors from wall street to main street are not just bummed out about our political process, they're worn out. >> investors don't have the confidence in our markets that we need and are looking for. and, what happened in washington did not help that scenario at all. >> suzanne: to be sure, experts say there's still one big reason for investors to cheer up and invest in stocks, and that's corporate profits.
the majority of s&p 500 firms have reported second quarter results and 72% have beat analysts' expectations. in a typical quarter since world war ii, only 62%, on average, exceed estimates. still, others say investors need to see that washington lawmakers are capable of working together. >> what will help our markets, what will help investor sentiment, is that we start seeing that unity once again. how does that happen? i think there will be other issues on the table that will have to bring parties together. some say sentiment will turn more positive in time, after all, it usually does. >> the one thing you can say about investors is that they have very short memories, and, it doesn't take much to turn them on a dime, because when it comes to fear and greed you this is the best mechanism in the world and you can see fear turn to greed pretty quickly. joining us with more about what investors are thinking, frank murtha, market psychologist and managing director of market psych.
frank, welcome to n.b.r. >> good to be here. >> suzanne: so, frank, do you agree? are investors bummed out? >> yes, i'd say that's a pretty fair assessment. at markets psyche we have different indicators, and what we found is that there are record levels of emotions like anger, disgust, and also mistrust. that we've ever seen. so there's a lot of negative sentiment out there. no doubt. >> suzanne: what's more dangerous for the market, anger or fear, on the part of investors, do you think? >> it's a great question. the bottom line is fear is always part of the market equation. people are sord of used to it. they are constantly reacting. what we're seeing is actually dust gust, which is a more powerful emotion. disgust is usually when people have had enough and they want to do something different. it remains to be seen whether or not these levels will play themselves out differently. but they wouldn't surprise me
one bit if it turned out to have a very harsh negative reaction. >> suzanne: i guess the big question is which is longer lasting. which is potentially more damaging for the outlook for the stock market? and when we're talking about investor emotions. >> anger is about certainty. when people are angry or disgusted for that matter, they're very focused and they know what it's about. you can make an argument that a lot of people based on this emotion will simply turn the page. we even say i'm going to find some place else to invest my money. but the bottom line is the gentleman who did the lead in was right. this is a very stormy relationship. investors break up with the market and seem to get back together again a lot. so it's hard to bet against that. >> suzanne: is it fair to say that the emotions of investors are fickle somewhat when it comes to investing in the stock market? >> at the risk of insulting everybody who invests, yes. we do don stantly get drawn into -- constantly get drawn into this
short-term focus, and when you're in a short-term focus emotions hold sway. this debt ceiling crisis was like an action movie in which they are trying to diffuse a bomb and they diffuse it with one second left. but, and everybody probably feels very good about that. what it serves to do is something that's quite different. it has focused our attention on a problem that frankly people were ignoring. >> suzanne: what do you think it will take to change the mood of investors? are they potentially a mob from now going to feel completely different about the stock market? >> you know, it's interesting. at market psych data we noticed a huge divergence negative sen tims getting worse throughout the summer, yet the stock market was climbing. there was a noticeable divergence that we hadn't seen before. usually those two are on the same page. so right now there's so much emotion in this market, it's very difficult. bottom line is if somebody reacts in a bad way and starts
the rockslide there's a good chance there will be a short-term reaction to that. >> suzanne: okay, thank, thank you very much. very interesting tidbits there. >> thank you. >> suzanne: our guess, frank murtha, managing director of market psych. >> tom: another piece of today's market story? the fear factor. even though stocks were able to finish with small gains, investors continue buying things like u.s. bonds and gold. the price on the ten-year note fell a fraction, putting the yield at 2.61%. gold prices continued their run to $1,700, adding $21.80 to close at $1664.90 an ounce in meanwhile, worries over the soft economy and lower demand pushed oil lower. crude for september delivery fell $1.86, or 2%, to $91.93 a barrel. still ahead, this illinois steel maker says business is good but it could be better. what he and other manufacturers
need to grow and hire. >> suzanne: congress may have solved the debt deal, but it hasn't managed to end a partial shutdown at the federal aviation administration. that shutdown has uncle sam losing an estimated $29 million a day in airfare taxes. you may think the battle at the f.a.a. is about those taxes. after all, they have expired and have to be renewed. but in fact, the fight in congress is over organized labor. tonight, darren gersh explains why that is. >> reporter: for 75 years, unions trying to organize airline workers have had to win support from a majority of all the employees who would be joining that union. workers who don't turn out to vote were effectively counted as no votes. but regulators appointed by president obama recently changed those rules. now airline workers trying to organize non-union companies like delta airlines will be able to form a union if they win a majority of the votes cast in a
union certification election. william gould ran the national labor relations board under president bill clinton and says the change means airline workers will be treated like every other worker trying to form a union. >> all require a majority of those actually voting. >> reporter: that's one side of the argument. on the other side, house republicans see the voting rules as another front in a political war with the obama administration and its labor union allies. in recent debates, republicans point out the rule change makes it easier to create a union, but doesn't allow workers to vote to leave a union. >> what's proposed as fairness is the height of unfair.
>> reporter: so house republicans are insisting any legislation reauthorizing the federal aviation administration reinstate the old voting rules. that's how airfare taxes become a fight over organized labor. democratic senators say they won't give in to house republicans, especially after doing so in the recent debt limit debate. >> it's an anti-worker agenda that is driving them and the rest of us are trying to get a very, very complicated f.a.a. bill passed. >> reporter: trying to force senate democrats to give in, house republicans stripped out support for rural airports, including one in senate majority leader harry reid's nevada. why does all this matter? the aviation industry says vital projects designed to reduce congestion are now on hold. >> they may not be experiencing it now, but with the delay in completing safety, security and capacity projects, everyone is going to suffer from this going forward. >> reporter: so how important are these new union voting rules? the "dallas morning news" looked at the last 19 union elections.
in two cases, unions won because of the new rules. in 17 others, the new voting rules made no difference. darren gersh, "nightly business report," washington. >> tom: while the f.a.a. shutdown drags on, the agency is losing almost $29 million a day in airline ticket taxes. and that could make for a big windfall for the nation's largest airlines. united, continental, delta and southwest have all raised ticket prices by 7.5% so that prices appear the same as when the tax was in effect. that means before this whole thing is solved when congress returns in september, the airlines could pocket almost $1 billion in extra revenues. what about the turbulence today in the new york stock exchange, i was a crazy ride. >> tom: it was, but we came in for a smooth landing, clearly smoother than the previous eight sessions, first up day in better than a week. so let's go ahead and roll with tonight's market focus.
the major stock indices were able to end in the green for the first time in about a week. the s&p 500 bounced up a fraction after hitting year-to- date lows yesterday, breaking the bottom we saw in june and in april. key numbers to watch still. mastercard shares charged ahead, the leading gainer of the s&p 500. the stock jumped more than 13% on heavier volume. tonight's close is an all-time high. it was the strongest stock in the strongest sector today, information technology. mastercard turned in a much- better-than-expected quarter. earnings were more than 50 cents per share over estimates. international consumers stepped up their usage of mastercard
credit and debit cards. leading to the big earnings surprise. also helping the tech sector? printer maker lexmark. shares jumped almost 6% as it's restarted its stock buyback program, putting some of its corporate cash to work. shares have had a tough time, getting hit back in october and then in april thanks to weak outlooks. the stock was able to pop a bit last month when lexmark reported stronger quarterly earnings. we mentioned oil earlier in the program, and here's a closer look. it's below $92 a barrel and is threatening to break below the june low around $90 per barrel. key number to watch. energy stocks saw the stiffest selling, led by these three.
marathon fell more than 5%, down to its lowest price since splitting into two companies at the end of last month. driller helmerich payne dropped almost 3%. murphy oil shed more than 2% to a new low for the year. coca-cola was the standout among dow industrial stocks, up 2%. nice move higher. with all the talk this week of government debt, coke sold $2 billion worth of bonds to refinance other debt. several companies are selling i.o.u.s, taking advantage of low interest rates to drop their borrowing costs, similar to refinancing a home mortgage. after the close, for-profit education company career education came into focus. earnings were nine cents per share better than estimates, but it signed up fewer new students, a key driver of future growth. it has been a choppy year for career ed as the industry has come under new rules for student loans. after tonight's news, the stock
fell by more than 10% from this closing price, taking it below $20 per share. the stock was under pressure as the company announcing an internal review of job placement rates. finally, a rare bright spot for research in motion. the stock has been crushed in recent months. today? up almost 5% after announcing a new slate of blackberry smart phones. and that's tonight's "market focus."
>> suzanne: is it a big bump in the road or a double dip recession? that's a question a lot manufacturers are asking. orders for new goods dropped in june for the first time in two years. in recent months, manufacturing has been a bright spot in the economy. the sector added more than 140,000 jobs in the first half of this year. still, as diane eastabrook reports, many companies say uncertainty about everything from taxes to trade are making them reluctant to hire. >> reporter: from the outside, business doesn't appear to be brisk at lapham hickey steel. but inside, workers at the bedford park illinois plant are busy cranking out sheets of metal used in everything from cars to combines. >> this is going to atlanta, georgia... >> reporter: company president william hickey says orders for steel have bounced back after bottoming out two years ago, and that's helped him restore staffing to near pre-recession levels at his seven plants. still, hickey says uncertainty over taxes and trade are keeping him from expanding and hiring more workers.
>> if you're subsidizing the export of manufactured goods from germany and you're taxing the import of manufactured goods from the united states, the reality is you're going to have an imbalance. these are the imbalances that have to be corrected. >> reporter: while manufacturers have added more than 140,000 jobs since the first of the year, they're a drop in the bucket compared to the nearly six million manufacturing jobs lost in the past decade. bruce kasman, global chief economist of j.p. morgan, thinks long-term prospects for manufacturing are favorable, but short-term prospects are dicey. >> it's tied to how consumers are feeling about the world. it's tied to the mix of very easy fed policy and, increasingly, fiscal policy turning to tightening will deliver. there's a whole host of things here. unfortunately right now we're going through a soft patch. we might be a little ways away from seeing growth get back to anything we see acceptable. >> hello.
>> reporter: sandra westlund deenihan might disagree. she's the president of quality float works in schaumburg, illinois. in the past year, she's hired seven full and part-time workers, about a 30% increase in staff. deenihan says quality float works has a backlog of orders for mechanical floats into next year, after expanding sales in the middle east. she's confident she can boost sales and staffing even more, but is concerned increased government regulation could derail her plans. >> if they come down the pipeline for business, that will mean i will have to stop r&d, i will have to not make capital improvements and of course i will have to stop being able to hire people. >> reporter: both deenihan and hickey think u.s. manufacturing can regain its place on the global stage, but they think it will take innovation from manufacturers and assistance from washington. diane eastabrook, "nightly business report," bedford park, illinois. >> tom: here's what we're watching for tomorrow: earnings-- we'll see how two of
the biggest initial public stock offerings in recent history are doing now; general motors and social networking website linked-in report quarterly results. also tomorrow, the latest weekly jobless benefit claims. and why it pays to go to college. a new study shows a definitive link between better education and better pay. >> suzanne: a massive cyber attack was unveiled today by mcafee. the web security provider says 72 groups, from governments to nonprofits and corporations, lost data over a five-year period. mcafee discovered the attacks earlier this year and says a nation-state is likely to blame. but, the company did not name a culprit. most of the victims were in the u.s., with a few in canada, south korea, taiwan and japan. >> tom: if you have been waiting to buy stock in chrysler, you're going to have to keep waiting. the automaker continues its post-bankruptcy turnaround and will not be selling stock to the public any time soon. today, the company's chairman, sergio marchionne, said an initial public stock offering
>> tom: doing more with less helps describe the business environment over the past few years, as companies trim costs to grow their bottom lines. tonight's "street critique" guest is looking to profit from that trend. she's hilary kramer, editor of gamechangerstocks.com. millary, you're looking at cognizant, an i. t. information technology service provider, works for banks, health care companies and others. the stock was able to pop higher today thanks to a stronger outlook. what pushes it above 72 and change? >> cognizant technologies works globally to help companies, especially in growth areas like computing and mobility, get more innovative cut costs and that's what it's really about, and it's amazing that a company like cognizant is still able to do well in this environment. but they're very, very competitive, even though they actually raised prices, their effectiveness is there in the marketplace, zoo you'll continue to see it run because
investors go after stocks that do well. >> tom: the company announced that it made over 7,000 net new hires in the past quarter, so there's a bullish outlook there. rebecca sent us a note online, writing some time back you said goal was in a multi year bull run. are you still of that opinion? as we know, not adjusted for inflation, gold prices are at record highs over $1600 an ounce. >> well, indeed, tom, 2007, 2008, 2009 i was calling gold on this show. then i stayed probably more on the sidelines, but with the big government being net buyers including south korea today, it's the indian season for buying gold for commercial and industrial purposes. i believe we're going to see gold continue to run. but you want to by the gld, we is an etf backed with fwold. be careful of buying the gold miners, they haven't performed because ironically they actually hedged the price of
gold, so you're not going to get a dollar for dollar by buying an under valued miner, even if it's run well. >> tom: those miners still have the cost of production they are to figure into their balance. >> exactly. >> tom: sam sent us a know write, about pfizer stocks. does she still feel this is a good stock to own? you first mentioned it in april. since then share prices have fallen off considerably, because of out earnings and concern about patent expiration with lipitor and what not. what do you think of pfizer at 18? >> well, pfizer is still going to execute a strategy of breaking up the company and spinning off starting with air animal health business. this is going to create a lot of value and opportunity for shareholders, and from the beginning i said keep those little pieces as they spin off. don't take extra pfizer shares or cash, you know, go into these new businesses, it's very similar to what bristol meyers did with the baby
nutrition baby formula company, that one more than tripled. so that's the opportunity with pfizer. but across the board let's not forget the market has just come off of eight days down in a. >> tom: yes. how about disclosures, do you own everything we mentioned tonight? >> i own all these stocks, yes. >> tom: you can e-mail us your questions at street critique.com, we try to get as many as we can. you can also reach us on twitter and facebook. next week hillary kramer. also online, be sure to catch "beyond the scoreboard" with rick horrow, looking at the silent stakeholders in the n.f.l., from restaurants to fantasy football >> sunday night, monday night, thursday night, restauranteurs experience a 50% to 100% increase, it's been shown. >> tom: you can catch the entire discussion at "beyond the scoreboard" online at n.b.r. on pbs.org. >> suzanne: that's "nightly business report" for wednesday,
august 3. i'm suzanne pratt. good night everyone, and good night to you too, tom. >> tom: good night suzanne. i'm tom hudson. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: this program was made possible this program was made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org >> be more. pbs.